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Friday, December 2, 2016

Dear Chairman

After a mid-year slump where I felt I wasn't getting enough from the books I was reading, I've been on a hot streak lately with some great ones. Dear Chairman is the latest book to get me fired up.

Each chapter in this book is dedicated to one case of activism. Author Jeff Gramm has found some of the most interesting cases of the last few decades, and provides colour about the market environment along with rule/legal changes that occurred as a result of the activism. You learn about companies, people and history, which makes this a fantastic book.

I'm no activist, and I prefer to invest with partners that have skin in the game or have track records which suggest they behave as if they do. And yet I found myself rooting for the activist in pretty much every case. It's probably because I sympathized with their points of view, having been a frustrated investor who has watched many a management try to loot a company. These include managers who hoard huge cash balances and/or spend shareholder funds with poor processes, which is what's going on in most of the book's cases.

Unfortunately, management has an advantage when it comes to these contests. They get to spend company money on the best law/IR firms while the activists are spending their own. But if you read Dear Chairman, you'd think activists have a great track record. And that may the truth, as according to this article activists either win or settled 84% of the time in 2014. These stats kind of suggest there probably should be more of it!